[Federal Register Volume 60, Number 109 (Wednesday, June 7, 1995)]
[Proposed Rules]
[Pages 30013-30019]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-13861]
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FEDERAL RESERVE SYSTEM
12 CFR Part 203
[Regulation C; Docket No. R-0881]
Home Mortgage Disclosure
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Proposed rule; staff interpretation.
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SUMMARY: The Board is publishing for comment a staff commentary to
Regulation C (Home Mortgage Disclosure). The commentary applies and
interprets the requirements of Regulation C. The proposed commentary
provides guidance on various issues including the treatment under
Regulation C of prequalifications, participations, refinancings, home
[[Page 30014]] equity lines, mergers, and loan applications received
through a broker. The Board believes the proposed commentary will
reduce burden and ease compliance by clarifying a number of issues, by
providing flexibility in compliance, and by consolidating the guidance
that is currently available from a variety of sources.
DATES: Comments must be received on or before August 7, 1995.
ADDRESSES: Comments should refer to Docket No. R-0881 and may be mailed
to William W. Wiles, Secretary, Board of Governors of the Federal
Reserve System, 20th Street and Constitution Avenue, NW., Washington,
DC 20551. Comments also may be delivered to Room B-2222 of the Eccles
Building between 8:45 a.m. and 5:15 p.m. weekdays, or to the guard
station in the Eccles Building courtyard on 20th Street, NW. (between
Constitution Avenue and C Street) at any time. Comments received will
be available for inspection in Room MP-500 of the Martin Building
between 9 a.m. and 5 p.m. weekdays, except as provided in 12 CFR 261.8
of the Board's rules regarding availability of information.
FOR FURTHER INFORMATION CONTACT: Jane Jensen Gell, W. Kurt Schumacher,
or Manley Williams, Staff Attorneys, Division of Consumer and Community
Affairs, Board of Governors of the Federal Reserve System, at (202)
452-3667 or (202) 452-2412; for the hearing impaired only, Dorothea
Thompson, Telecommunications Device for the Deaf, at (202) 452-3544.
SUPPLEMENTARY INFORMATION:
I. Background
The Board's Regulation C (12 CFR Part 203) implements the Home
Mortgage Disclosure Act of 1975 (HMDA) (12 U.S.C. 2801 et seq). HMDA
requires most mortgage lenders located in metropolitan areas to collect
data about their housing-related lending activity. Annually, lenders
must file reports with their federal supervisory agencies and make
disclosures available to the public. The reports and disclosures cover
loan originations, applications that do not result in originations (for
example, applications that are denied or withdrawn), and loan
purchases. Information reported includes the location of the property
to which the loan or application relates; the race or national origin,
gender, and gross annual income of the borrower or applicant; and the
type of purchaser for loans sold in the secondary market.
The Board has received many requests from other supervisory
agencies and from financial institutions suggesting adoption of a staff
commentary to Regulation C to provide guidance on compliance with the
regulation. In response, the Board is proposing to issue a staff
commentary (12 CFR part 203 (Supp. I)) that interprets the regulation.
The Board believes the commentary will provide significant assistance
to institutions by clarifying a number of issues and providing
flexibility in compliance with the regulation. The proposed commentary
follows the narrative format used in most of the Board's other staff
commentaries, such as those issued to interpret Regulation Z (12 CFR
part 226) and Regulation B (12 CFR part 202). The proposed commentary
provides general guidance in applying the regulation to various
transactions, and would be updated periodically to address significant
questions that arise.
II. Explanation of Proposed Commentary
The proposed commentary incorporates much of the guidance in A
Guide to HMDA Reporting--Getting It Right!, developed by member
agencies of the Federal Financial Institutions Examination Council
(FFIEC) (the Office of the Comptroller of the Currency, the Federal
Deposit Insurance Corporation, the Office of Thrift Supervision, the
National Credit Union Administration, and the Federal Reserve Board),
and the Department of Housing and Urban Development. Other sources of
material in the proposed commentary include supplementary information
published in the Federal Register notice of the amendments to
Regulation C recently adopted by the Board (59 FR 63698, December 9,
1994) and other Federal Register notices on Regulation C, and portions
of Appendix A to the regulation. The Board believes that consolidating
the guidance that is currently available from a variety of sources into
one source will ease compliance and reduce burden.
The Board solicits suggestions on additional issues that are not
addressed in this proposal but that may need clarification, and will
consider adding commentary material to address such issues in the final
version of the commentary.
In cases where provisions of Regulation C have been modified by the
amendments issued by the Board in December 1994 (scheduled to take
effect on a mandatory basis in calendar year 1996), the relevant
commentary provisions relate to those amendments rather than the
existing regulatory requirements.
Most of the proposed commentary material is self-explanatory. The
following discussion, however, provides some explanation on a few of
the points covered in the proposal.
Section 203.1--Authority, Purpose, and Scope
1(c) Scope
Refinancings
Proposed comments 1(c)-3 and -4 clarify that an origination
includes the refinancing of a home purchase loan for purposes of
determining coverage and exemptions from coverage. The comments provide
guidance on alternate ways an institution may identify transactions to
determine coverage and data collection requirements.
Participations
Proposed comment 1(c)-7 would allow the reporting of an
institution's partial interest in a participation loan, at the
institution's option. Among other things, this would allow an
institution to report its partial interest in a large-dollar home
purchase or home improvement loan. Of course, given the exclusion in
section 203.4(d) from reporting the purchase of an interest in a loan
pool, the present comment is intended to allow the reporting of partial
interests where the reporting institution has a direct interest in the
loan itself, and not an interest in a security such as a mortgage-
backed security.
The Board solicits comment on whether reporting participation
interests in this manner will address home mortgage lending by a
consortium of lenders. A consortium may be structured in several ways.
If a consortium is a nonprofit mortgage lender, it would not be covered
under Regulation C. If the consortium is a for-profit mortgage lender
that meets the tests for coverage under Regulation C, it would report
applications and loans originated by the consortium. If the consortium
is structured so that participating lenders underwrite and originate a
loan, each lender may report its partial interest in the loan.
Section 203.2--Definitions
2(b) Application
Prequalifications
Financial institutions must report action taken upon applications
for (as well as originations and purchases of) home purchase and home
improvement loans (including refinancings). Institutions have asked the
Board for clarification on the correct treatment under Regulation C of
prequalification and preapproval programs. [[Page 30015]]
In its amendments to Regulation C issued in December 1994, the
Board deferred a final determination on whether and how lenders ought
to report prequalifications (or preapprovals). Instead, the Board
provided that institutions need not include data about
prequalifications (or preapprovals) in their HMDA submissions for
calendar year 1994 or 1995.
The Board believes that prequalification requests (as that term is
used in the proposed commentary) are not applications for purposes of
Regulation C, even though they may be applications under Regulation B.
Proposed comment 2(b)-2 provides guidance so that institutions can
distinguish a request for a prequalification from an application under
Regulation C.
The Board may consider proposing amendments to Regulation C to
address prequalifications and preapprovals, including whether
institutions should be required to report some or all preapproval
requests. (A preapproval request is generally considered to be a
request by an applicant for a commitment from an institution to lend a
specific amount, subject to the applicant's selection of residential
property that is satisfactory to the institution. A preapproval program
may be part of or separate from the institution's mortgage loan
application program.) If, for example, coverage included all
preapprovals, the Board might consider adding to the purpose codes
``code 5. Preapproval'' to distinguish preapprovals from other
application procedures. The Board may also consider adding a new action
taken code, such as ``code 7. Loan preapproved'' to distinguish
situations where a loan is preapproved but not originated from other
actions taken on applications.
2(e) Financial Institution
Foreign banks
Proposed comments 2(e)-1 and -2 discuss coverage of various types
of branches and other offices of foreign banks for purposes of
Regulation C. The definition of a covered institution in HMDA refers,
in part, to banks as defined in the Federal Deposit Insurance Act (FDI
Act). The FDI Act definition of ``bank'' includes certain types of
branches and offices of foreign banks, and excludes other types.
Accordingly, certain branches and offices of foreign banks, which meet
the FDI Act definition of ``bank,'' are covered by HMDA as depository
institutions (assuming they are not excluded by some other exemption).
Other branches and offices of foreign banks, which do not meet the FDI
Act definition, are covered by HMDA only if they meet the tests for
coverage of nondepository institutions.
2(g) Home-purchase Loan
Home Equity Lines
Under Regulation C, institutions have the option to report that
portion of a home equity line of credit that the borrower indicates, at
the time of application or when the account is opened, will be used for
home improvement purposes. Proposed comment 2(g)-6 sets forth the same
position with regard to home equity lines to be used for home purchase
purposes. As in the case of home equity lines for home improvement, the
institution may choose not to report home equity lines at all. If the
institution reports home equity originations, the institution must also
report home equity applications that did not result in originations. If
the institution chooses to report a home equity line, it should report
only the amount indicated at time of application or establishing the
credit line, to be used for purposes of purchasing a dwelling.
Section 203.3--Exempt Institutions
3(a) Exemption Based on Location, Asset Size, or Number of Home-
purchase Loans
Mergers
Proposed comment 3(a)-2 deals with reporting responsibilities in
situations where two financial institutions merge. The proposed comment
is based on material in the Guide to HMDA Reporting, but additional
detail has been added concerning mergers involving a covered and an
exempt institution. (Other material from the section of the Guide
relating to mergers and changes in supervisory agencies appears in
proposed comments 3(a)-3 and 5(a)-1.)
Section 203.4--Compilation of Loan Data
4(a) Data Format and Itemization
Paragraph 4(a)(6)
Location of Property--BNAs
Proposed comment 4(a)(6)-4 allows institutions to report block
numbering areas (BNAs) for properties located in counties for which
census tracts have not been established. This option would provide more
detailed information that may be used to examine and assess an
institution's housing-related lending.
Paragraph 4(a)(7)
Income of Applicants
Proposed comment 4(a)(7)-5 provides guidance regarding data
reporting requirements for applicant income. The comment clarifies that
institutions must report all income used to make the credit decision.
This figure would include any income the institution considers in
qualifying the applicant, even if the funds are not factored into the
debt-to-income ratio analysis.
III. Form of Comment Letters
Comment letters should refer to Docket No. R-0881. The Board
requests that, when possible, comments be prepared using a standard
courier typeface with a type size of 10 or 12 characters per inch. This
will enable the Board to convert the text into machine-readable form
through electronic scanning, and will facilitate automated retrieval of
comments for review. Comments may also be submitted on computer
diskettes, using either the 3.5'' or 5.25'' size, in any IBM-compatible
DOS-based format. Comments on computer diskettes must be accompanied by
a hard copy version.
List of Subjects in 12 CFR Part 203
Banks, banking, Consumer protection, Federal Reserve System,
Mortgages, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Board proposes to
amend 12 CFR part 203 as follows:
PART 203--HOME MORTGAGE DISCLOSURE (REGULATION C)
1. The authority citation for part 203 continues to read as
follows:
Authority: 12 U.S.C. 2801-2810.
2. Part 203 would be amended by adding a new Supplement I--Staff
Interpretations after the Appendices to read as follows:
Supplement I to Part 203--Staff Interpretations
Introduction
1. Status. This commentary in this supplement is the vehicle by
which the staff of the Division of Consumer and Community Affairs of
the Federal Reserve Board issues staff interpretations of Regulation
C (12 CFR part 203).
Section 203.1--Authority, Purpose, and Scope
1(c) Scope.
1. General. The comments in this section address issues
affecting coverage of institutions, exemptions from coverage, and
data collection requirements. (Paragraphs I., II., IV. and V. of
Appendix A of this part.) [[Page 30016]]
2. Meaning of refinancing. A refinancing of a loan is the
satisfaction and replacement of an existing obligation by a new
obligation by the same borrower. The term ``refinancing'' refers to
the new obligation. If the existing obligation is not satisfied and
replaced, but is only renewed or modified (such as in certain
``modification, extension, and consolidation agreements''), the
transaction is not a refinancing. (Paragraph V.A.5. Code 3. of
Appendix A of this part.)
3. Refinancing--coverage. For purposes of determining whether an
institution is covered by Regulation C or is exempt, an origination
of a home purchase loan includes the refinancing of a home purchase
loan. (Paragraphs I.B., I.C. and I.D. of Appendix A of this part.)
When an institution refinances an existing obligation, the
institution must either:
i. Assume that if the refinancing results in a new obligation
secured by a lien on a dwelling, the new obligation is a refinancing
of a home purchase loan under Regulation C (and may assume, if the
new obligation is not secured by a lien on a dwelling, that it is
not a refinancing of a home purchase loan); or
ii. Determine the purpose of the existing obligation. The
institution may use the following guidelines:
a. The institution may rely on the statement of the applicant or
borrower.
b. If the existing obligation was secured, the institution may
assume that it was for home purchase purposes, and that the new
obligation is a refinancing of a home purchase loan under Regulation
C.
c. If the existing obligation was unsecured, the institution may
assume that it was not for home purchase purposes, and that the new
obligation is not a refinancing of a home purchase loan under
Regulation C.
4. Refinancing--data collection. For purposes of data collection
(paragraph V.A.5. Code 3. of Appendix A of this part) an institution
must either:
i. Assume that if a refinancing results in a new obligation
secured by a lien on a dwelling, the new obligation is a refinancing
of a home purchase or home improvement loan under Regulation C (and
may assume, if the new obligation is not secured by a lien on a
dwelling, that it is not a refinancing of a home purchase or home
improvement loan); or
ii. Determine the purpose of the existing obligation. The
institution may use the following guidelines:
a. The institution may rely on the statement of the applicant or
borrower.
b. If the existing obligation was secured, the institution may
assume that it was for home purchase or home improvement purposes,
and that the new obligation is a refinancing under Regulation C.
5. Meaning of ``broker'' and ``investor institution.'' The term
``broker'' (or correspondent) refers to any party (whether a bank,
thrift, credit union, mortgage banker, mortgage broker, or other
type of depository or nondepository institution) that takes and
processes loan applications from applicants and that has an
arrangement with another party (an ``investor institution'') under
which the investor institution (1) reviews the application prior to
closing, (2) makes a credit decision, and (3) determines whether to
acquire the loan at or after closing. (Paragraphs IV.A. and V.B.1.
of Appendix A of this part.)
6. The broker rule--originations. If an investor institution
reviews a loan application from a broker prior to closing, makes a
decision to extend credit, and then acquires the loan at or after
closing, the investor institution originates that loan for purposes
of Regulation C, whether the loan closes in the name of the broker
or the investor institution. If a broker submits a loan application
to more than one investor, each investor reports the action it has
taken on the application. For example, each investor denying the
application reports a denial. (Paragraphs IV.A. and V.B.1. of
Appendix A of this part.)
7. Broker's use of investor institution's underwriting criteria.
A broker makes a decision to extend credit based on underwriting
criteria set by an investor institution, but without the investor
institution's review before closing. Under these facts, the broker
originates that loan for purposes of Regulation C (unless the broker
is an agent or contract underwriter for the investor institution),
and the investor institution that acquires the loan after closing
purchases the loan under Regulation C. If the broker is subject to
Regulation C, the broker reports as originations the loans that it
approves and closes, and reports as denials the loan applications
that it turns down (either because they do not meet the investor's
underwriting guidelines or for some other reason).
8. Post-closing review by the investor institution. An investor
institution agrees with a broker to purchase loans that meet the
investor institution's underwriting guidelines, which the broker
uses in making credit decisions on loan applications. The investor
institution reviews loans only after closing to confirm that the
loans meet its underwriting guidelines. Under these facts, the
broker originates the loans and the investor institution purchases
the loans under Regulation C. If the broker is covered by Regulation
C, the broker reports as originations the loans that it approves and
closes, and reports as denials the loan applications that it turns
down. The investor reports only those loans it purchases.
9. Third-party underwriting guidelines. An investor institution
agrees to purchase from a broker loans that have government or
private insurance, but does not review loan applications prior to
closing. The broker evaluates loan applications using the insurer's
guidelines, or delivers applications to the insurer for a
determination on whether it will insure the loan. After closing, the
investor institution purchases those loans that have been insured.
Under these facts, the broker makes the credit decisions and the
investor institution purchases the loans under Regulation C. The
investor reports those loans it purchases; it does not report other
loans. If the broker is covered by Regulation C, it reports as
originations the loans that it approves and closes, and reports as
denials the loan applications that it turns down.
10. Participation loan. If an institution participates in the
underwriting and origination of a home purchase or home improvement
loan, it may report the transaction as an origination to the extent
of its participation interest, or it may choose not to report the
transaction. If an institution chooses to report originations, it
must also report applications that do not result in originations
(for example, denials). When a single institution originates the
loan and subsequently sells participation interests to other
institutions, those institutions report their interests as purchased
loans. (Paragraphs I., II., IV. and V. of Appendix A of this part.)
Section 203.2--Definitions
(2)(b) Application.
1. Consistency with Regulation B. The definition of
``application'' in Regulation C is virtually identical to the
definition of ``application'' in Regulation B (Equal Credit
Opportunity, 12 CFR Part 202). Accordingly, guidance in the official
staff commentary to Regulation B is generally applicable to the
definition of an application under Regulation C. (Paragraph IV.A. of
Appendix A of this part.)
2. Prequalification. A prequalification request is generally
considered to be a request by a prospective loan applicant to a
lending institution for a preliminary determination on whether the
prospective applicant would likely qualify for credit under the
institution's standards, or on how much credit the prospective
applicant would likely qualify for. Further, a prequalification
request is generally evaluated by the institution through a
procedure that is separate from the institution's normal loan
application process. A prequalification request is not an
application under Regulation C, even though it may constitute an
application under Regulation B, requiring a lender to notify an
applicant of the action taken. (Paragraphs I. and IV.A. of Appendix
A of this part.)
(2)(c) Branch office.
1. Depository institution. A branch of a depository institution
does not include a loan production office or the office of an
affiliate, nor does it include the office of a third party such as a
loan broker. (Paragraphs I., V.A.6. and V.C. of Appendix A of this
part.)
2. Nondepository institution. A branch of a nondepository
institution does not include the office of an affiliate or other
third party. (Paragraphs I., V.A.6. and V.C. of Appendix A of this
part.) (But see paragraph V.C.6. of Appendix A of this part,
requiring nondepository institutions to report property location
even in MSAs where they do not have a physical location.)
(2)(d) Dwelling.
1. Scope. The definition of ``dwelling'' is not limited to the
principal or other residence of the applicant or borrower. Thus,
vacation or second homes and rental properties are dwellings under
Regulation C. Dwellings include mobile or manufactured homes,
multifamily structures (such as apartment buildings), and
condominium and cooperative units. Recreational vehicles such as
boats or campers are not dwellings. (Paragraphs I.B., IV., and
V.A.5. of Appendix A of this part.)
(2)(e) Financial institution. [[Page 30017]]
1. Branches of foreign banks--treated as a bank. Both a federal
branch and a state-licensed insured branch of a foreign bank are a
``bank'' under the Federal Deposit Insurance Act, and are covered if
they meet the tests for a depository institution found in
Secs. 203.2(e)(1) and 203.3(a)(1). (Paragraphs I.A. and I.B. of
Appendix A of this part.)
2. Branches and offices of foreign banks--treated as a for-
profit mortgage lending institution. Federal agencies, state-
licensed agencies, state-licensed uninsured branches of foreign
banks, commercial lending companies owned or controlled by foreign
banks, and entities operating under section 25A or 25 of the Federal
Reserve Act (Edge Act and agreement corporations) are covered by
Regulation C if they meet the tests for a nondepository mortgage
lending institution found in Secs. 203.2(e)(2) and 203.3(a)(2).
(Paragraphs I.C. and I.D. of Appendix A of this part.)
(2)(f) Home-improvement loan.
Paragraph (2)(f)(1).
1. Home improvement. A home improvement loan is a loan to be
used for improvements to a dwelling or to the real property on which
the dwelling is located. (Paragraphs IV. and V.A.5. Code 2. of
Appendix A of this part.) Examples include:
i. Installation of a swimming pool;
ii. Construction of a detached garage;
iii. Landscaping; or
iv. Purchase of appliances to be installed as fixtures to the
dwelling.
2. Multiple properties. A home improvement loan includes a loan
secured by one dwelling, with the proceeds to be used to improve
another dwelling. (Paragraphs IV. and V.A.5. Code 2. of Appendix A
of this part.)
3. Mixed-use property. A loan to improve property used primarily
for residential purposes (for example, an apartment building
containing a convenience store) is a home improvement loan.
(Paragraphs IV. and V.A.5. Code 2.)
4. Multipurpose loan. A loan to make home improvements (even
though less than 50 percent of the total loan proceeds are to be
used for this purpose) may be treated as a home improvement loan
provided that the institution classifies the loan as a home
improvement loan. (Paragraphs IV. and V.A.5. Code 2. of Appendix A
of this part.)
5. Home equity lines. An institution may report the part of a
home equity line of credit that is for home improvement. An
institution that reports the origination of home equity lines must
also report applications that did not result in originations.
(Paragraphs IV. and V.A.5. Code 2.c. of Appendix A of this part.)
6. Reliance on statement of borrower. An institution may rely on
the oral or written statement of an applicant or borrower that the
loan proceeds will be used for home improvement purposes.
(Paragraphs IV. and V.A.5. Code 2.c of Appendix A of this part.)
Paragraph (2)(f)(2).
1. Classification. The requirement that a loan be ``classified''
as a home improvement loan provides flexibility to institutions in
determining which loans to report. An institution meets the
requirement if it has entered a loan on its books as a home
improvement loan, or has otherwise identified or coded the loan as a
home improvement loan. For example, an institution that has marketed
a loan, ``booked'' it, or reported it on a ``call report'' as home
improvement loan has ``classified'' it as a home improvement loan.
(Paragraphs IV. and V.A.5. Code 2. of Appendix A of this part.)
(2)(g) Home-purchase loan.
1. Multiple properties. A home purchase loan includes a loan
secured by one dwelling, with the proceeds to be used to purchase
another dwelling. (Paragraphs IV. and V.A.5. Code 1. of Appendix A
of this part.)
2. Mixed-use property. A loan to purchase property used
primarily for residential purposes (for example, an apartment
building containing a convenience store) is a home purchase loan.
(Paragraphs IV.A., IV.B.1. and V.A.5. Code 1. of Appendix A of this
part.)
3. Commercial and other loans. A home purchase loan includes a
loan for home purchase purposes originated outside an institution's
mortgage lending division (such as a loan for the purchase of an
apartment building handled by the institution's commercial loan
department). (Paragraphs IV. and V.A.5. Code 1. of Appendix A of
this part.)
4. Farm loan. If the property being purchased is used primarily
for agricultural purposes--even if the property includes a
dwelling--a loan to purchase the property is not a home purchase
loan. (Paragraphs IV.B.1. and V.A.5. Code 1. of Appendix A of this
part.)
5. Construction/permanent loan. Construction-only loans are
``temporary'' financings under Regulation C and are not reported. If
the institution commits to provide both the construction and the
permanent financing, however, the loan is a home purchase loan for
purposes of Regulation C. (Paragraphs IV.A. and B.2 and V.A.5. Code
1. of Appendix A of this part.)
6. Home equity lines. An institution may report the part of a
home equity line of credit that is for home purchase. An institution
may rely on the oral or written statement of an applicant or
borrower that the loan proceeds will be used for home purchase
purposes. An institution that reports the origination of home equity
lines must also report applications that did not result in
originations. (Paragraphs IV. and V.A.5. Code 1. of Appendix A of
this part.)
Section 203.3--Exempt Institutions
3(a) Exemption based on location, asset size, or number of home-
purchase loans.
1. General. An institution that ceases to be a financial
institution (as that term is defined in Sec. 203.2(e)) or that
becomes an exempt institution under this section may stop collecting
HMDA data beginning with the first calendar year after the event
that resulted in noncoverage. For example, a bank whose assets drop
to $10 million or less on December 31 of a given year collects data
for that full calendar year, but need not collect data for the
succeeding year. (Paragraph I. of Appendix A of this part.)
2. Coverage after a merger. Data collection responsibilities
under several scenarios are described below for the calendar year of
the merger. (Paragraph I. of Appendix A of this part.)
i. Two institutions are exempt from Regulation C. The
institutions merge, producing a covered institution. No data
collection is required; the surviving institution begins HMDA data
collection in the following calendar year.
ii. A covered and an exempt institution merge. The covered
institution is the surviving institution. Data collection is
required for the covered institution's transactions; data collection
is optional for transactions of the previously exempt institution
(for example, transactions handled in offices of the previously
exempt institution).
iii. A covered and an exempt institution merge. The exempt
institution is the surviving institution. Data collection is
required for the covered institution's transactions taking place
prior to the merger, and is optional for transactions taking place
after the merger date and attributable to the covered institution.
iv. Two covered institutions merge. The surviving institution is
required to collect all data for both institutions; it may file a
consolidated submission or separate submissions for that year.
3. Mergers versus purchases in bulk. If a covered institution
acquires loans in bulk from another institution (for example, the
receiver of a failed institution), but no merger or acquisition is
involved, the institution treats the loans as purchased loans.
(Paragraph V.B. of Appendix A of this part.)
Section 203.4--Compilation of Loan Data
4(a) Data format and itemization.
1. Quarterly updating. An institution should make a good-faith
effort to enter all data concerning covered transactions--loan
originations (including refinancings), loan purchases, and the
disposition of applications that did not result in an origination--
fully and accurately within 30 days after the end of each calendar
quarter. If the quarterly update shows that some data are inaccurate
or incomplete despite this good-faith effort, the error or omission
is not a violation of Regulation C. (Paragraph II.E. of Appendix A
of this part.)
Paragraph 4(a)(1).
1. Application date--consistency. In reporting the date of
application, an institution enters the date an application was
received or the date shown on the application. The institution
should be consistent in its practice. (Paragraph V.A.2. of Appendix
A of this part.)
2. Application date--application received through broker. For an
application forwarded by a broker, an institution enters the date
the application was received by the broker, the date the application
was received by the institution, or the date shown on the
application. The institution should be consistent in its practice.
(Paragraph V.A.2. of Appendix A of this part.)
3. Application date--reinstated application. If an applicant
asks an institution to reinstate a counteroffer that the applicant
previously rejected (or to reconsider a denied application), the
institution may treat the request as the [[Page 30018]] continuation
of a single transaction if the applicant's request occurs within the
same calendar year as the prior disposition of the application.
Alternatively, the institution may treat the request as a separate
transaction and the date of the request as the application date.
(Paragraph V.A.2. of Appendix A of this part.)
Paragraph 4(a)(3).
1. Loans outside an MSA. If a loan relates to property not
located in an MSA (or to property in an MSA where the institution
has no home or branch office under Regulation C), the institution
may report the actual occupancy status or use the code for ``not
applicable.'' (Paragraphs V.A.7.c. and V.C.6. of Appendix A of this
part.)
2. Multiple properties. If a loan relates to multiple
properties, the institution reports the owner-occupancy status for
the property that is reported under comment 1 to paragraph
203.4(a)(6). (Paragraph V.A.6. of Appendix A of this part.)
Paragraph 4(a)(4).
1. Multiple purpose loan. If a loan relates to other purposes in
addition to home purchase or home improvement, the institution
reports the entire amount of the loan, even though not all of the
proceeds are for home purchase or home improvement. (Paragraph
V.A.8. of Appendix A of this part.)
2. Home equity line of credit. An institution that reports home
equity lines reports only the amount that the applicant indicates
will be used for home improvement or home purchase purposes.
(Paragraph V.A.8.c. of Appendix A of this part.)
3. Counteroffer. If an institution makes a counteroffer to lend
an amount different from an applicant's initial request and the
counteroffer is accepted, the institution reports the loan amount as
the amount actually granted. If the counteroffer is rejected or if
the applicant fails to respond to the counteroffer, the institution
reports the amount initially requested. (Paragraph V.A.8.f. of
Appendix A of this part.)
4. Participation loan. An institution reporting a participation
loan origination enters the amount of its interest. (Paragraph
V.A.8. of Appendix A of this part.)
Paragraph 4(a)(5).
1. Action taken--counteroffer. If an institution makes a
counteroffer to lend an amount different from an applicant's initial
request and the counteroffer is accepted, the institution reports
the loan as an origination. If the counteroffer is rejected or if
the applicant fails to respond to the counteroffer, the institution
reports the action taken as a denial. (Paragraph V.B. of Appendix A
of this part.)
2. Action taken--rescinded transaction. If an applicant rescinds
a transaction after closing, an institution reports the action taken
as an origination or as approved but not accepted. (Paragraph V.B.
of Appendix A of this part.)
3. Action taken--purchased loan. An institution reports only
purchased loans, not loans that the institution has declined to
purchase. (Paragraph V.B. of Appendix A of this part.)
4. Action taken--conditional approval. If an institution issues
a loan approval subject to the applicant's meeting certain
underwriting or other conditions and the conditions are not met, the
institution reports the action taken as a denial. (Paragraph V.B. of
Appendix A of this part.)
5. Action taken date--approved but not accepted. For a loan
approved by the institution but not accepted by the applicant, the
institution reports either the date of the commitment letter sent to
the applicant or any deadline that the institution gave the
applicant for accepting the offer. The institution should be
consistent in its practice. (Paragraph V.B.3.b. of Appendix A of
this part.)
6. Action taken date--origination. Generally, for originations,
an institution enters the settlement or closing date. For a loan
that an investor institution acquired through a broker and reports
as an origination, the institution enters the settlement date, the
closing date, or the date the institution acquired the loan from the
broker. The institution should be consistent in its practice.
(Paragraph V.B.3. of Appendix A of this part.)
7. Action taken date--construction/permanent loan. For a
construction/permanent loan, the institution reports the date the
institution enters into the construction-loan transaction or when
the loan converts to the permanent financing. The institution should
be consistent in its practice. (Paragraph V.B.3. of Appendix A of
this part.)
Paragraph 4(a)(6).
1. Multiple properties. For a loan secured by one dwelling and
made for the purpose of purchasing or improving another dwelling or
dwellings, an institution reports the location of the property taken
as security. For a loan secured by two or more dwellings, and for
the purpose of purchasing or improving one of those dwellings, an
institution reports the location of the purchased property.
(Paragraph V.C. of Appendix A of this part.) For example:
i. For a loan to purchase or improve property A, secured by
property B, report the location of B (the property taken as
security);
ii. For a loan to purchase or improve properties A and B,
secured by property C, report the location of C (the property taken
as security);
iii. For a loan to purchase or improve property A, secured by
properties A and B, report the location of A (the property purchased
or improved); and
iv. For a loan to purchase or improve properties A and B,
secured by properties A and B, the institution may report the
location of A or B (one of the properties taken as security).
Alternatively, the institution may report the loan in two entries on
its Loan/Application Register (using unique identifiers and
allocating the loan amount between A and B).
2. Loans purchased from another institution. The requirement to
report the location of a property in an MSA where the institution
has a home or branch office applies not only to loan applications
and originations but also to loans purchased from another
institution. This includes loans purchased from an institution that
itself did not have a home or branch office in that MSA (and thus
may not have collected the property location information).
(Paragraph V.C. of Appendix A of this part.)
3. Mobile or manufactured home. If information about the
potential site of a mobile or manufactured home is not available, an
institution may enter the code for ``not applicable.'' (Paragraph
V.C. of Appendix A of this part.)
4. Use of BNA permitted. Block numbering areas (BNAs) are
statistical subdivisions delineated by state agencies and the U.S.
Census Bureau for grouping and numbering blocks in counties for
which census tracts have not been established. BNAs (which generally
are identified in census data by numbers in the range 9501 to
9999.99) may be entered if no census tract number exists. (Paragraph
V.C.4. of Appendix A of this part.)
Paragraph 4(a)(7).
1. Applicant data--joint applicant. If a joint applicant does
not file the application in person and does not provide the
monitoring information, the institution reports using the code for
information not provided by applicant in mail or telephone
application. (Paragraph V.D. of Appendix A of this part.)
2. Applicant data--application completed in person. When an
applicant meets with a loan officer to complete an application that
was begun previously (for example by mail or telephone), the
institution must treat the application as taken in person and
request the monitoring information. A loan closing is not a meeting
with a loan officer to complete an application. (Paragraph V.D. of
Appendix A of this part.)
3. Applicant data--completion by applicant. An institution
reports the monitoring information an applicant provides. If an
applicant fails to provide the requested information for an
application taken in person, the institution enters the data on the
basis of visual observation or surname. If an applicant checks the
``other'' box the institution must report using the ``other'' code.
(Paragraph V.D. of Appendix A of this part.)
4. Applicant data--interactive video application. An institution
that uses an interactive application process with video capabilities
should treat these applications as taken in person and collect the
information about race or national origin and sex of applicants.
(Paragraph V.D. of Appendix A of this part.) (See Appendix B of this
part for procedures to be used for data collection.)
5. Income data--income relied upon. Except for income of
cosigners (sureties) and guarantors, an institution enters the gross
annual income relied on in evaluating the creditworthiness of
applicants. For example, if an institution uses an applicant's
salary to compute a debt-to-income ratio, but also relies on the
applicant's annual bonus to meet underwriting standards and approve
the loan, the institution reports both salary and bonus. (Paragraph
V.D.5. of Appendix A of this part.)
6. Income data--co-applicant. If two persons jointly apply for a
loan and both list income on the application, but the institution
relies only on the income of one applicant in evaluating
creditworthiness, the institution should report only the income of
the one [[Page 30019]] applicant. (Paragraph V.D.5. of Appendix A of
this part.)
7. Income data--cosigners and guarantors. Although an
institution may rely on the income of cosigners and guarantors in
making a credit decision, an institution does not report this
income. Because cosigners and guarantors generally are not
``applicants'' under Regulation B, they are not treated as co-
applicants under Regulation C. (Paragraph V.D.5. of Appendix A of
this part.)
8. Income data--loan to employee. An institution may enter
``NA'' in the income field for a loan to its employee for privacy
reasons, even though the institution may have relied on income in
making its credit decisions. (Paragraph V.D.5. of Appendix A of this
part.)
Paragraph 4(a)(8).
1. Type of purchaser--loan participation interests sold to more
than one entity. Where a loan is originated by one institution but
is sold to more than one entity, the originating institution reports
the type of purchaser based on the entity purchasing a majority
interest, if any. Otherwise, the institution uses the code for loans
not sold in the calendar year covered by the register. (Paragraph
V.E. of Appendix A of this part.)
4(c) Optional data.
1. Agency requirements. The reporting of reasons for denial,
although optional under HMDA and Regulation C, may be required
information for institutions that are regulated by an agency such as
the Office of Thrift Supervision. (Paragraph V.F. of Appendix A of
this part.)
4(d) Excluded data.
1. Loan pool. The purchase of an interest in a loan pool (such
as a mortgage-participation certificate, a mortgage-backed security,
or a real estate mortgage investment conduit or ``REMIC'') is a
purchase of an interest in a security and is not reported.
(Paragraph IV.B.5. of Appendix A of this part.)
Section 203.5--Disclosure and Reporting
5(a) Reporting to agency.
1. Change in supervisory agency. If the supervisory agency of a
covered institution changes, the institution reports data for the
year of the change and subsequent years to its new supervisory
agency. (Paragraphs I., III. and IV. of Appendix A of this part.)
2. Subsidiaries. An institution is a subsidiary of a bank or
savings association (for purposes of reporting HMDA data to the
parent's supervisory agency) if the bank or savings association
holds or controls an ownership interest that is greater than 50
percent of the institution. (Paragraph I.E. of Appendix A of this
part.)
5(e) Notice of availability.
1. Poster--suggested text. The wording of the poster text
provided in Appendix A (``Instructions for Completing the HMDA-
LAR'') is optional. An institution may use other text that meets the
requirements of the regulation. (Paragraph III.G. of Appendix A of
this part.)
Section 203.6--Enforcement
6(b) Bona fide errors.
1. Bona fide error--data from third parties. Although an
institution may obtain the property location information for
applications and loans from third parties (such as appraisers or
``geocoding'' vendors), the reporting institution is responsible for
ensuring that the data are correct. An incorrect census tract number
can be treated as a bona fide error (and is thus not a violation of
the act or regulation) only if the institution has maintained
procedures reasonably adopted to avoid the error, such as performing
an audit of the information. (Paragraph V.C. of Appendix A of this
part.)
By order of the Board of Governors of the Federal Reserve
System, acting through the Secretary of the Board under delegated
authority, June 1, 1995.
William W. Wiles,
Secretary of the Board.
[FR Doc. 95-13861 Filed 6-6-95; 8:45 am]
BILLING CODE 6210-01-P